Explanatory Value of Risk Factors for Post-IPO Volatility

Abstract: Since 2017, Swedish business magazine Affärsvärlden examines all Swedish IPOs and subsequently hand out risk flags divided upon 21 predetermined measures. These flags aim to highlight uncertainties connected to the maturity, suitability, IPO process and prospectus of respective companies. The purpose of this thesis is to analyse the explanatory value of independently determined risk factors on the ex-post volatility of companies going public. Data consists of 329 IPOs screened by Affärsvärlden between 2017 and 2021. Using linear regression, our results suggest that these risk flags as a cumulative measure is positively correlated with higher price variance. With respect to each category of flags, we find that risks connected to the listing process itself have a statistically significant correlation with higher variance, whereas maturity, suitability and prospectus information do not.